South Africans are in survival mode 

South African consumers are entirely absorbed by their finances and how they will make it to their next payday – so much so, that personal relationships with family, friends and colleagues are falling by the wayside.

This is one of the worrying findings in the latest Consumer Financial Vulnerability Index (CFVI) by Momentum and UNISA for the second quarter of 2023.

The groups noted that this survival mode thinking was already present in the first quarter of the year, but had become worse in the second quarter.

Financial vulnerability

The report said that growing interest rates, high inflation and load shedding continued to keep consumers under severe pressure in Q2 2023.

The index remained below the neutral 50 points in Q2 2023, increasing only slightly from the 49.1 points in Q1 2023 to 49.3 points in Q2 2023.

“The CFVI had now been below the level of 50 points for 12 out of the last 15 quarters (since Q3 2019), indicating a persistent state of financial vulnerability,” the report said.

On top of high food prices, load shedding and rising petrol prices remaining as the risk factors which exerted the most pressure on consumer finances, escalating interest rates were the highest-ranked risk factor which had the largest additional impact on consumer finances in Q2 2023 compared to Q1 2023 – followed by low economic growth.

South Africa ended the second quarter (June 2023) with interest rates at 14-year highs. The South African Reserve Bank delivered some slight relief in July (Q3) with a hold on rates. Economic growth, meanwhile, is projected to be relatively flat in 2023, with most economists anticipating around 0.5% for the year.

The biggest risks affecting consumer prices can be seen below:

The outlook for an improvement in the economic environment remains muted, with expectations that the economy’s poor performance will continue, inflation will remain sticky at relatively lower levels, and unemployment will remain at high levels.

What’s on their minds

With all the negative sentiment, Momentum and UNISA flagged deteriorating “mental bandwidth” among consumers.

The groups said that the prolonged state of financial vulnerability has affected the mental state and behaviour of South Africans.

For Q1 2023, the biggest behavioural change was seen in consumers constantly seeking or making plans to survive the month, which hurt productivity and other key areas of their lives.

In Q2 2023, this continued, and the vast majority (73.7%) of consumers were fully absorbed in and constantly thinking about their finances, the report said.

Despite low mental bandwidth continuing in Q2 2023, the strongest impact was a further deterioration in interpersonal relationships with family, friends and colleagues.

How South Africans have been affected by the current economic climate can be seen below:

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